Orion Money — opening the stablecoin savings gateway into Anchor Protocol

TL;DR —At Orion Money, we are launching the gateway for stablecoins on other blockchains to access Anchor Protocol, providing boosted tiers of APY depending on your Orion holdings.

Traditional money market instruments such as Certificate of Deposits and Treasury Bills have historically been seen as yield generating assets that offer superior liquidity and safety. However, with the multiple interventionist monetary policies introduced by central bankers over the years, yields on these traditional money market instruments have fallen drastically — driving down the time value of assets for investors.

Yields on Certificate of Deposits across different maturities, 2010–2021 | Source: FRED

Evolution of the money market

Then came along the Decentralize Finance (“DeFi”) revolution, which saw decentralized money markets gaining huge traction. DeFi has been the name of the game for the past year and experienced record-breaking Total Value Locked (“TVL”) growth in just under a year. DeFi expanded the use of blockchain from simple value transfer to more complex financial use cases and aimed to disrupt the key elements of work done by centralized financial institutions. DeFi’s TVL, which sat just under $1 Billion in May 2020, has, at its peak, grown to an $87 Billion market in March 2021.

We have seen the establishment of Compound and Aave, two of the pioneering decentralized money market protocols built on Ethereum, and have empowered cryptocurrency users to exchange the time value of their Ethereum assets frictionlessly. The demand for the products and yields that decentralized money markets protocols offer exploded as part of the DeFi boom and, at their peak, accumulated more than $20 Billion TVL over the past year. Compound and Aave money markets utilize interest rate models, which adjust over time as the relationship between supply and demand changes. The yields that lenders (depositors) get from supplying liquidity are a factor of the leveraged demand for credit and are hence very volatile. During strong bull runs, when borrowing rates are high, lending yields shoot up. However, during severe market drawdowns, lending yields plummet as a result.

Stable and high-yielding deposit rates on Anchor Protocol

The DeFi market needed a fixed-income solution — the ability to provide accessible, safe, stable, and attractive yields for the main street investor, even in the most severe moments of market volatility.

So came Anchor Protocol.

Anchor is a decentralized money market and savings protocol on the Terra blockchain. At its core, Anchor serves the same function as other decentralized money markets. The caveat? A stable and low volatile 20% APY interest rate paid to depositors on their Terra stablecoin (UST) deposits which are principal protected. It achieves this by stabilizing the deposit interest rate with block rewards accruing to assets used to borrow stablecoins.

Anchor has essentially enabled the “yield transfer” from borrowers to depositors through passing on the yields generated from borrowers’ overcollateralized bAssets. The yields that a stablecoin depositor can expect are hence a function of borrowers’ on-chain income.

Anchor has created a sophisticated yield generating mechanism yet straightforward enough to understand for the main street investor. Anchor’s ultimate vision is to become the gold standard for passive income on the blockchain.

Gaps to be resolved in the stablecoin savings market

The attractive and low volatile lending yields on Anchor are currently only accessible to Terra stablecoin (UST) depositors. Users with stablecoins on other blockchains are not able to have direct access to Anchor. As a result, we have identified two prevailing gaps that we seek to tackle:

  1. There is a huge stablecoin market that lacks direct access to Anchor’s money market protocol. As of May 2021, the stablecoin market cap reached a key milestone of $100 Billion. However, >85% of the stablecoin market cap is dominated by the top 3 Ethereum-based stablecoins (USDT, USDC, DAI). The Terra stablecoin (UST), while fast-growing, currently makes up ~2% of the entire stablecoin market. A gateway that bridges these stablecoins into Anchor immediately opens the protocol up to a much wider user base with a greater volume of liquidity.
Cumulative stablecoin market capitalization | Source: Blockchaincenter.net

2. Stablecoin deposit yields on the Ethereum blockchain are highly volatile, and on average, not as attractive as the Anchor Rate. The 30 days average crypto lending rates across decentralized money market protocols and crypto exchanges have been sitting at a range of 8–12% APY. As mentioned above, we have further observed the average crypto lending rates dipping way below this range during periods of massive market drawdowns. The Anchor savings protocol overcomes these limitations and offers a very clear value proposition over its competitors.

Launching the stablecoin savings gateway to Anchor Protocol

Enter Orion Money.

At Orion Money, we aim to have interoperability at our core and envision bridging these gaps to expand Anchor’s reach to a much wider user base.

Our first step?

Launching the gateway for stablecoins on other blockchains to access Anchor Protocol.

We are removing the barriers that are currently limiting stablecoins on other blockchains to flow into Anchor. We are as excited as you are to enable the possibility for Ethereum-based stablecoins such as USDT, USDC, and DAI to experience the stable and high-yielding deposit interest rates offered by Anchor.

The Orion Money team is working day and night to bring our vision to reality, and we are more excited than ever to have you join us on our journey to bring Anchor to the masses.

Here is a teaser of what is to come 😉:

Tiered-level APY on your stablecoin deposits

APY levels across different tiers for Orion Money — Earth, Station, and Moon

The gateway is about to open. We are just days away from our official launch, keep a close eye on this space as things are about to get huge very soon.

- The Orion Money Team

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